The first part of my YNAB love story featured growing in awareness and planning for future cash flow needs. The second part detailed the credit card float and my new approach to balancing my checkbook. Next came one eureka moment and yet another cloud in my financial picture. Read on for the silver lining!
Step Five: Easy Transaction Records
As I mentioned in my very first YNAB post, I had tried to budget using Excel before. When that didn’t work, my Excel “budget” turned into a transaction log. It was an excellent transaction log, though, because I never fell out of the habit of tracking every single penny that went into or out of my life.
I had one problem staying on top of my records, though: I could never remember cash. (That’s probably why I’m not an envelope budgeter.) When I use my debit or credit card to buy something (or even when I pay by check), I have an automatic record of my spending. When I paid with cash, I had to make note of it somehow and get that note into my Excel spreadsheet back at home. (I hadn’t converted to GTD-style ubiquitous capture yet, either.)
Before I had a smartphone, there was a lot of guessing (and even more forgetting) when I spent cash. Even after I got my first iPhone, I didn’t have a system. Sometimes I made a note in the native Notes app, but I rarely remembered to transfer that note to Excel. I emailed myself for a while, but the habit didn’t stick. I needed a way to record cash that was uniform, fast, and easy to get into my transaction log.
YNAB solved that problem. The software comes with a free app (which is also available during the 34-day trial) that syncs mobile with desktop. It was the missing piece to my budgeting life. Now, I spend, I enter the transaction on my phone right away, and my records are updated. Done.
The YNAB Classic app, however, was where I had all of my problems.
The data sync options weren’t the greatest. We live in a world where security is important and it’s only a matter of when your information will be stolen, not if. (By 2015, I was up to one unimportant online account and one set of college records, not counting Heartbleed. My dad had a cell phone contract started in his name by someone else.) I won’t go into detail about my previous problem with YNAB information security here (because volunteering that kind of information is just silly), but it was less than ideal.
Similarly, I loved that the app syncs transactions automatically, but I wished I could change the budget from the app. (As of 2018, YNAB now does this!) With the Classic version of the app, my budget was automatically updated to include scheduled transactions, but when I couldn’t roll with the punches on the go, I had to brace myself for later. That definitely affected my workflow. It could also throw things off to have my paycheck hit the bank several days before “payday” but not be Available to Budget until the scheduled day. I’m very glad to have that change now.
I have seen the difference in dollars, though, especially since I became Buffered, so I’m sticking with YNAB despite some room for improvement with the app.
Step Six: Acknowledging Interest and My Negative Net Worth
My friend Carly DeFelice runs an Austin-based personal finance business called The Finance Plan. She gave a presentation at Spirit & Truth last year about personal finance and Christian stewardship. She spoke some about budgeting, but she also spoke about interest.
I don’t have credit card debt anymore, and I paid off my car loan this year (the agonizingly slow and steady way), but I do have several thousand dollars in student loan debt. I’ve forbidden myself to take on any more non-free education until I pay off my debt. None of it is from graduate school (thanks to ACE and AmeriCorps, that was free), but I still have my undergrad loans. Since I pay toward them every month, they are categories in my budget.
It was YNAB that first made me acknowledge the reality of my student loan interest. YNAB allows you to track accounts off-budget. For me, that’s my student loans (individually, since they have different balances and interest rates) and my retirement accounts from my current and previous jobs. I pay the same amount each month toward my loans: a little principal, a lot of interest. When my loan account statements come, I update the balances in YNAB. I was stunned the first time I realized how much interest my loans accrued every month! Looking at that number convinced me that I needed to pay extra toward my debt. Seeing the numbers made them real.
What was even more real and frightening was my net worth. YNAB generates a number of reports automatically. The one I spend the most time with is the Net Worth tracker. YNAB only knows about the accounts you enter. I track all my accounts in YNAB, so I can see the grand total of my cash, checking account balance, credit card balances, savings account, student loans, and retirement accounts.
Added all together, I faced the truth: I have a negative net worth. I owe more than I have. There’s another truth, though. Slowly but surely, my debt is decreasing (especially with my recent loan payoff), and YNAB shows me exactly how much less I owe and how much more I have, all the time.
Awareness of my baby steps toward being debt-free is awesome.
There’s one more step to my YNAB love story, and then I’ll offer some conclusions about this journey toward financial awareness and freedom from debt. Stay tuned!
Kristin Wong, writing for Get Rich Slowly, shared her decision to go back to the envelope system even after paying off her debts. Constant awareness is key. I’m not sold on the absolute necessity of actual paper money, but the YNAB app is a virtual envelope system if you’re into that.